Shortfall in Maintenance Fund & Use of Sinking Fund

Question

There is a shortfall in maintenance fund to pay for the property maintenance and management expenses. Can the Sinking Fund be used to pay for the maintenance & management expenses?

Answer

The sinking fund shall be used for capital expenditure (CAPEX) only as per
Strata MManagement Act. Hence the use of sinking fund for maintenance & management expenses is prohibited. Any such use is an offence under the Act.

Sec 11 (4c), 24 (2), 51 (2) of Strata Management Act state clearly that the sinking fund account shall be used solely for the purposes of meeting the actual or expected capital expenditure.

One should find out how the shortfall in maintenance fund arise. Is it due to:
1. High percentage of default in payment by strata unit owners, and/or
2. Budgeted expenses for Maintenance & Management are higher than the budgeted income from maintenance charges

It would be good to study the debtor ageing report and action taken by the management committee on the recovery of debt.

Any person who fails to comply with subsection 11(4) commits an offfence and shall, on conviction, be liable to a fine not exceeding RM250,000 or to imprisonment ofr a term not exceeding 3 years or both [Section 11(7), SMA].
Any developer who fails to comply with subsection 51(2) commits an offence and shall, on conviction, be liable to a fine not exceeding RM250,000 or to imprisonment for a term noexceeding 3 years or to both [Section 51(3), SMA]

Ref: REHDA @ 4 Jun 2018